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China Is Exporting Unemployment | Michael Pettis on Global Trade Imbalances, American Capital Controls, and the End of The Chinese Growth Miracle
Forward Guidance
Examining Global Trade Imbalances and the Impact on Global Growth
Trade can enhance global growth under specific conditions where exports lead to beneficial imports, acting as a net gain for both parties involved. However, when trade consists solely of exports without reciprocal imports, it can inhibit global growth rather than promote it. This scenario arises when the production in one sector, such as fish, remains stagnant or declines, while another sector, like shoes, increases production without the expected beneficial trade exchange. Historical perspectives from economists including John Maynard Keynes and Charles Arthur Cornett highlight that, despite the prevalent belief in the inherent benefits of trade, there are critical conditions necessary for trade to truly foster growth. The failure to recognize these dynamics has led to a misunderstanding of trade's role in the global economy since the mid-20th century.
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